HOW LAW FIRMS ARE DEALING WITH UNDER-USED PARTNERS

by Joel A. Rose

Increased competition among law offices to attract and retain top partners and associates has placed greater pressure on managing partners and members of executive committees to face the issues involving the underused partner. Lawyer management knows that it must satisfy its attorneys. Therefore, most law firms today are less willing than before to tolerate the problems created by others - particularly when their livelihood is at stake.

Managing partners and members of executive committees must heed certain early warnings: the partner who works too few hours, rendering time spent on clients unproductive, the partner who, although a hard worker, does not produce enough revenue, or the partner who displays unwillingness to communicate with other partners on business and substantive matters.

The firm that ignores early warning signs in the expectation that the situation will work itself out and disappear is merely compounding the problem. Inaction is viewed as a tacit endorsement of the unproductive behavior. Firms must be prepared to cope with the underused partner in a straightforward fashion, to remedy the situation and to make it clear that lawyer management is not willing to let the underused partner take advantage of the office.

It is curious that a law office’s form of governance frequently dictates the kind of approach selected for dealing with the underused partner. Firms with a strong central management - those with a dominant managing partner or CEO type of leader, and those with a committee system based on representative governance - usually are better able to take action. In a firm organized as a democracy, however, no individual or group may be willing to assume authority to deal with problems. Authoritative action may be viewed as disturbing the congenial and collegial relationship between the attorneys.

The following describes action plans implemented by leaders in more financially and professionally successful firms to deal with underused partners:

Re-engineering the underused partner. This approach calls for retraining the partner and transferring him or her to another practice area. Depending on their age, experience and personality, certain partners may be able to rebuild their positions in the firm by training in new practice areas. Managing partners must determine a partner’s willingness and ability to develop new expertise, and whether the firm can afford to pay the direct and indirect costs of this training, over an extended period of time. Also, since a firm must retain its experienced and profitable associates, retraining a mid-level or senior partner in a different practice area may convey to associates in that area that there are limitations in their career development within their practice area.

Written objectives and standards: Many law firms establish objectives and standards for each partner that are consistent with interest, abilities, personal and professional skills, i.e., rainmaking, producers of work, management and administration, training of associates, or a combination.

Peer Review: This approach builds controls for preservation of quality in performance and service by evaluating each attorney against a set of predetermined standards of measurement. The standards may combine qualitative, quantitative, relative and purely judgmental categories that relate to a lawyer’s performance. From the firm’s standpoint, the basic purposes for this type of review are to improve the effectiveness of an attorney’s performance in his or her current position, aid the administration and further development of his or her career, and alert management to potential problem areas at the earliest stages.

Counseling: The managing partner, executive committee, or a special committee of partners may meet privately with the underused partner to review the obligations that partners are expected to satisfy and to advise the partner of the firm’s concerns. During these talks, the committee usually reviews the benchmarks against which partners are evaluated, and how this partner falls short. These talks might enable the individual to grasp how this problem is affecting the firm. This approach is particularly suited for dealing with office-related issues such as lower productivity, fewer billable hours, collections and lower billings. If, however, the partner is unwilling or unable to acknowledge the problem, then the counseling partner may have to recommend more stringent action. If a partner cannot adjust individual performance to meet the firm’s expectations or requirements, management has an obligation to proceed with corrective measures.

Of Counsel: Some firms offer underused partners the opportunity to transfer from active to “of counsel” status. As of counsel, the partner is entitled to retain an office and share secretarial assistance, but has limited duties to perform on the office’s behalf.

Early Retirement: If the underused partner is eligible for early retirement and elects to exercise this option, then he or she should have the right to withdraw from the office after providing a certain amount of notice. A partner who retires under these circumstances usually is eligible for certain benefits.

Reduced Draws: When a partner has an adequate volume of available client work but has not performed at the expected level, the firm may need to reduce that partner’s draw accordingly. In many offices, the solution is to keep the problem partner’s income at a constant level while the percentage or points assigned to other partners increase. Under some circumstances, firms reallocate billing and revenue-production targets and compensate the partner in direct proportion to his or her total contribution. Most firms allow this partner to re-establish his or her former compensation level by improving performance and increasing production and billings.

Reassignment: When improvement does not occur and the problem partner’s client and billing responsibility fails to satisfy the firm’s performance standards, some firms reassign the client and billing responsibility to another partner.

Non-equity Partner: In addition to stripping partners of certain responsibilities, some firms have created a second class of non-equity partner. In these situations, the non-equity partner may have his or her capital contribution returned over a period of time.

Paid or Unpaid Leave: When the problem partner requires hospitalization or extended outside treatment, it is not uncommon for firms to grant a paid or unpaid leave of absence. On the partner’s return to the office, the managing partner or executive committee, in conjunction with the underused partner, may determine an appropriate work schedule and basis for compensation. Some firms agree to compensate the partner at a set figure based on a prearranged number of work hours and specified duties. If the partner satisfies these obligations, he or she may be eligible to return to former status with the other partners’ approval.

Termination: Expelling a partner from a law office is one of the most dramatic decisions a partnership ever confronts. Most partnership agreements with an expulsion provision enumerate such offenses for which a partner can be terminated. Some offices provide that the expelled partner be paid on the same basis as a withdrawing partner. Other offices provide for limited payments to the expelled partner, or none at all.

In today’s practice environment, most partners learn that tradition, established hierarchy and age are no longer the shields they once were, especially when lack of performance results in a stabilized or declining level of business. In this era of partner mobility, greater emphasis must be placed on rewarding partners for their total contribution to the firm. Today’s law firm cannot risk its future by bowing to the status quo.